Politics and Gas Prices
History may attribute the rise in prices to the Iranian Revolution of 1979, in which the Shah was chased out of power by a huge popular uprising. Iranian oil production was disrupted, yet the prices increased more than they should have. OPEC increased production to compensate, so the supply of oil had dropped only slightly. The problem was panic; the revolution had taken the world by surprise. President Carter’s decision to suspend Iranian oil imports didn’t help, nor did his infamous speech (YouTube) bemoaning a “crisis of confidence” in America—contrary to popular belief, he never used the word “malaise”. Despite the realities of the global situation, oil prices in America surged. Some readers will remember the gas lines, and drivers ironically wasting fuel as they idled in queues.
The Dawn of Green Energy?
What happened next is a bit harder to remember. We may think that Carter’s defeat in the 1980 election meant his plea for Americans to conserve energy failed. Either way, higher oil prices compelled Americans to build better insulation into new houses, and to improve insulation in older construction. High-MPG foreign cars such as Toyotas, Hondas and the VW Rabbit gained a foothold in the U.S. market. Detroit answered with the Chrysler K-car platform. New technologies made household appliances much more efficient.
Some of those gains were counteracted by our tendency to consume more energy when our tools become more efficient. Think of it as the impulse to take a longer Sunday drive when gas prices are low, projected across the entire economy. It’s also true that we’ve only recently emerged from a decade-plus love affair with the gas-guzzling SUV. But many of the gains stuck; no one would tear the insulation out of their house just because the price of heating oil went back down.
From the Reagan administration to today, gas prices have gone down, and up, and down, and up (and up) again. Americans pay a little more now per gallon, adjusted for inflation, than we paid in 1979. But we’ve learned to be more efficient. Although we consume more BTUs of energy overall, we are 88% more efficient today than we were in 1979 in terms of energy consumed per inflation-adjusted dollar of GDP.
Fuel for the Arab Spring
Today the Middle East is increasingly volatile, with popular uprisings threatening governments throughout the Arab world. Most recently, The Libyan conflict caused a spike in oil futures. For now, oil prices are regulated by OPEC, and they’re able to increase production when the price of a barrel suddenly shoots up. When the price goes down, they do the opposite. What does this mean for consumers?
Prices will go up, prices will go down. World events will have their impact, but not always in the way we expect, and not necessarily for long. There are forces at play that we can’t predict or control—from OPEC, to the energy lobby, to our own government-affiliated National Petroleum Council.
Here’s what you can do: be efficient now, regardless of the price at the pump. Buy a fuel-efficient or hybrid car, or don’t buy a car at all. Buy Energy Star-rated air conditioners and other appliances. Insulate your home as well as you can. Take that shorter Sunday drive, or go for a spin on your own two legs. When prices dip, or more efficient technologies are introduced, resist the urge to splurge. Your wallet will benefit, you’ll be contributing to a cleaner environment, and you’ll help to reduce the demand for—and therefore the price of–oil.
In other words, party like it’s 1979.
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Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: Any outbound links in this post will take you away from Simple.com, to external sites in the wilds of the internet; neither Simple nor our partner bank, BBVA USA, endorse any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.